Registering a company in China is still a relatively complicated procedure, despite the fact that the People’s Republic of China authorities are struggling to make those procedures easier for foreign businessmen. In China, there are four basic types of business presence. We need to keep in mind that every province has its own distinctive features which should be analyzed before choosing the place for our business. Every potential investor should evaluate his time and financial capabilities before making such decisions. As the opening business in China may take a lot of time, we present some basic modes of operation accompanied with the short description. While registering the company in China, we should seek help of the professional companies and institutions which already have the experience in this field; they will help us to choose the most suitable type of business presence.
Representantive Offices, RO
The main advantage of this type of business presence is the low cost, this type is the most popular among the foreign entrepreneurs. It enables them to obtain residence permits. There are several disadvantages though: ROs do not have legal personality, they cannot issue invoices, the personnel must be employed through the governmental agencies. This type is chosen mostly by companies which are performing market surveys or are overseeing the Chinese contracting party (ie. factory) while importing from China.
This type of business presence is well known among the foreign investors, which should not be surprising, because that was the first type of foreign business operation allowed by the government of China. In this case, the foreign investor holds the part of the shares, but the majority of the shares are controlled by the Chinese company. From the long-term perspective, it may cause the loss of control over the company. Why this type of cooperation is still very popular? Because in the many branches of economy, for example the construction industry, the Chinese government gives us no other choice: Joint Venture is the only accepted form of cooperation.
Wholly Owned Foreign Enterprises, WOFE
This solution gives us the full control of our company and the legal personality in China. It is usually chosen by companies, which are willing to start production or offer services in China. The only drawback is the requirement to pay the founding capital, often of a big amount. This type of business presence is recommended for those, who are sure of their cooperation with the Chinese company.
Foreign Invested Commercial Enterprise
As in the case of WOFE, our company has the legal personality and limited responsibility. FICE is suitable for companies which are willing to take up the internal and the international trade. In this case, this is the best solution. There is a requirement of paying the initial capital as well.
The types of business presence were shortly described above. Before we decide which type is the best for us, we should do the research and ask for the professional help. We need to keep in mind that starting a business in China is a complicated process, which should be initiated with caution.